British Airways-owner IAG raises 2016-2020 profit goal
By Sarah Young
LONDON (Reuters) - British Airways-owner IAG raised its earnings growth target for 2016-2020 to more than 12 percent a year on Friday, showing its confidence at a time when rivals are struggling to push through the sort of cost cuts it made years ago.
Shares in IAG, which have gained 8 percent in the last three months, were up a further 2.3 percent to 594 pence at 0940 GMT, closing in on an all-time high of 630 pence reached in March.
IAG's focus on growing profit at its portfolio of airlines comprising BA, Ireland-based Aer Lingus and Spain's Iberia and Vueling comes as rivals Lufthansa and Air France-KLM battle with strikes and staff opposition to cost cuts.
"We expect IAG to further decouple from structurally weaker peers," said Jefferies analyst Mark Irvine-Fortescue.
Lufthansa on Friday warned it would likely cancel most short-haul flights later in the day after its main cabin crew union were called to strike. It has already been hit by over a dozen pilot walkouts in the last 18 months.
Air France, meanwhile, has had to lower its sights on cost cuts after negotiations ended with managers fleeing a meeting with angry employees and scrambling over fences.
IAG boss Willie Walsh has been praised by investors for managing to cut costs at both BA and Iberia since the pair sealed an $8 billion merger in 2011, acting before its French and German rivals, to become more competitive against Gulf carriers on long-haul routes and low-cost airlines such as easyJet in Europe.
Issuing a series of improved financial metrics ahead of an investor event on Friday, IAG said it would aim for average annual earnings per share growth of more than 12 percent, up from the 10 percent-plus figure previously targeted over the 2016-2020 period.
IAG also said it was planning for an operating profit margin of 12 to 15 percent, up from guidance of 10 to 14 percent, and return on invested capital of 15 percent, compared with an earlier goal of 12 percent-plus.
"Hitting these targets would deliver a financial performance unprecedented for a European network airline," said Liberum analyst Gerald Khoo.
At the investor day, analysts are expecting the airline to reveal further details of potential savings from IAG's 1.3 billion euro acquisition of Aer Lingus, finalised in August.
IAG also announced on Friday that Alex Cruz, current chief executive of Vueling would next year replace Keith Williams as executive chairman of British Airways as Williams retires.
(Editing by Paul Sandle and Mark Potter)
